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For-Profit Firm Cracks the Combination at the Combined Federal Campaign

Playing by the rules of the federal workplace giving program (similar to the United Way campaign), charity coalitions managed by Maguire/Maguire capture $60 million of the nearly $270 million given by federal workers.

Yet the story is worth telling. In the interest of expanding choice in workplace giving, the Combined Federal Campaign, run by the Federal Office of Personnel Management, allows any 501(c)(3) charity to participate in the campaign. But rather than go through the annual qualification process individually, many charities opt to participate as part of a coalition or federation, which is much easier. Once qualified, whether directly or through a coalition, each charity is entitled to equal billing in the campaign's annual brochure, which every campaign is required to reproduce without alteration. (Here's the brochure for the 2006 CFC for the National Capital Area, the largest campaign by far.) The brochure is distributed to something like 4 million Federal workers, and about 1.3 million participate in the campaign (using 2003 figures). The 2005 campaign raised nearly $270 million.

The federation/coalition route is the key to easy participation, and a number have sprung up, in addition, of course, to the United Way campaigns. These groups are required to be 501(c)(3) organizations themselves. However, Maguire/Maguire has made a lucrative business out of creating coalitions that his firm then manages for a fee. (Mr. Maguire runs the firm himself. The double name is just designed to make the firm sound more formidable.) Twelve such coalitions raised $60 million in 2005, about 22% of the total raised by the CFC (I've listed them below). Many of the participating charities are small, but in nearly every case he has also enlisted at least a few big name charities in the field.

From the Form 990s of the coalitions, it appears that they had total expenses of about $4.5 million in the fiscal year ended 4/30/2006. Almost $2.5 million of that were the fees paid to Maguire/Maguire. The Chronicle article reports that the organization has a staff of fifteen with four independent contractors. Using my rule of thumb of $50,000 of fully loaded expenses per staff person, I estimate that the firm has about a million in expenses, yielding an estimated total of $3.5 million to Mr. Maguire. (The Chronicle article suggests that Mr. Maguire makes additional income from sharing in commissions from advertising in promotional booklets; either way, we both agree that the $2.5 million in fees represents a minimum for his take.)

Competing coalitions have been aghast at the profits and lobbied OPM to audit the Maguire coalitions, which have come through unscathed. There was a free article about the audits back in 2004 (but nothing about the exoneration). The complaining coalitions like America's Charities (EIN 54-1517707 Form 990) and Earth Share (EIN 52-1601960 Form 990) charge membership dues that appear to be two or three times the rate of Mr. Maguire's fees, but rather than going to profits they support significantly larger staffs relative to the amounts raised.

The problem here is that coalitions create too easy a path to participation in the CFC and its access to Federal workers. The coalitions are there to vouch for the legitimacy of their members, but the Maguire/Maguire approach reduces any incentive the coalition has to vet its membership closely. The coalitions easily become a ticket to ride on the CFC gravy train.

Mr. Maguire also annoys other federations with his marketing practices, described in a companion article (also subscription only). His keys to success in the jungle of the CFC campaign brochure are:

An attention grabbing name—if the organization doesn't have one, create one by establishing a dba or doing-business-as name. (The abuse potential here is to come up with a name similar to that of a large, well-known charity. And Mr. Maguire advises clients to create multiple organizations with different names to pull in donors with more specialized interests and concerns.)

An attention grabbing description—the CFC brochure allows twenty-five words, and in the list below I've included the descriptions to illustrate the Maguire marketing style. (The abuse here is inherent in the premise of the CFC brochure—that all charities are considered equally legitimate simply by virtue of their 501(c)(3) status, nothing else.)

Low overhead. (The abuse potential here is great, because there is no standard definition of overhead. Expenses can simply be classified out of overhead categories to accomplish the objective.)

Marketing summary: the name stops, the statement sells, the overhead closes.

Here are the Maguire coalitions, what they raised in 2005, and their CFC descriptions. The ranking of coalitions is probably a good indicator of the relative popularity of various causes among the federal employees:

Children's Charities of America (EIN 94-3148588 Form 990) CFC 2005: $10,589,541 Description: All children are our future. They all deserve our love. Join us to feed, teach, protect, and nurture children in America and around the world.

Military, Veterans & Patriotic Service Charities of America (EIN 94-3193418 Form 990) CFC 2005: $9,146,046 Description: Help us keep America strong, safe, and free and remember, honor, and keep faith with our veterans, with those who serve today, and their families.

Animal Charities of America (EIN 94-3193389 Form 990) CFC 2005: $7,210,097 Description: Protecting pets, wildlife, and endangered species. Teaching people to treat animals with respect. Humane training of animals as helpmates and companions to people in need.

Cancer CURE of America: Care, Understand, Research & End (EIN 81-0648432 Form 990) CFC 2005: $6,421,492 Description: Support this coalition of world class cancer charities, leading the way with new treatment modalities, better patient care, and research to someday find the cure.

Human Care Charities of America (Independent Charities of America) (EIN 94-3067804 Form 990) CFC 2005: $2,759,384 Description: Feeding the hungry. Sheltering the homeless. Protecting the children. And healing the sick. America’s finest independent charities. Working with you to share- the American way.

Do Unto Others: America's Emergency Relief, Development and Humanitarian Outreach Charities (EIN 94-3148590 Form 990) CFC 2005: $2,621,795 Description: Help respected, efficient charities bring relief to the refugees of famine, epidemic, and war, end poverty, protect the environment, and sow the seeds of peace.

Educate America: the Education, School Support and Scholarship Funds Coalition (EIN 94-3193387 Form 990)CFC 2005: $986,182 Description: Your gift will be shared among America’s finest educational opportunity charities, dedicated to making our children and young people the best educated in the world.

Hispanic United Fund (EIN 68-0455509 Form 990) CFC 2005: $872,396 Description: The voice of America’s Hispanic Heritage and Latino charities, working together to build stronger communities and brighter futures for our families and our neighbors worldwide.

Comments

Wow, just looking at the top earner, Children's charities of America, the total cost of raising a dollar is 7 to 8 cents. Not bad at all. I don't know fundraising that well but that seems low for a work place giving campaign. just in case anyone wants to check my math, total amount raised - total amount donated to charity on last page of 990 (9,733,140) divided by the total again (10,549,541) only half of that cost went to the Maguire firm as well. if someone can give you a dollar for 3 cents, I say use em.

I'm really puzzled by the "outrage" implied and expressed over Mr. Maguire's business success. It appears he does a great job for his nonprofit clients. Is it the "P" word (profit) or the "C" word (consultant)that provokes the anger and/or envy of his competitors and critics? IMHO, the bigger travesty has to do with donor behavior. Where is the outrage over idiot donors who would make a contribution based almost solely on a 25-word blurb in a charity "catalog"?

Not bad at all. I don't know fundraising that well but that seems low for a work place giving campaign. just in case anyone wants to check my math, total amount raised - total amount donated to charity on last page of 990 (9,733,140) divided by the total again (10,549,541) only half of that cost went to the Maguire firm as well. if someone can give you a dollar for 3 cents, I say use em.